Hostess Expects Bids for Drake's, Bread Brands: Source

Monday, 28 Jan 2013 | 10:49 AM ETReuters

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Hostess Brands is close to securing initial bids for its Drake's cake business and four bread operations that could net the bankrupt bakery company more than $50 million, according to a source familiar with the matter.

An announcement of the deals, part of the company's bankruptcy reorganization, could come Monday, according to the source, who requested anonymity because the talks are not public.

McKee Foods, maker of Little Debbie snack cakes, is expected to offer roughly $27 million for Drake's, which makes Devil Dogs, Ring Dings and Yodels, said the source, noting negotiations were ongoing so the final price could change.

United States Bakery, also known as Franz Family Bakery, is expected to bid about the same amount for Hostess bread brands including Sweetheart, Eddy's, Standish Farms and Grandma Emilie's, according to the source.

Hostess and McKee declined to comment. An official at Franz, a fourth-generation, family-owned company based in Portland, Ore., was not immediately available.

These "stalking horse bids" set baseline offers for the assets and are still subject to auctions.

Earlier this month, Hostess chose Flowers Foods to start the bidding at $390 million for its bread brands including Wonder, Butternut, Home Pride, Merita and Nature's Pride.

Still outstanding is Hostess's iconic Twinkies brand. The company's lawyer said last week that Hostess was in advanced discussions with a number of parties for the remainder of its snack business, including Twinkies.

Hostess received court permission to wind down its 82-year-old business in November after a strike by a bakery union crippled its operations. The company is liquidating assets — everything from bakery brands to equipment to real estate.

McKee Foods, a privately held company based in Collegedale, Tenn., is best-known for its Little Debbie cakes, which are named after the granddaughter of founders O.D. and Ruth McKee. The company currently offers more than 150 varieties of Little Debbie snacks.

With seven bakeries in the Northwest, Franz already produces breads, rolls and cookies under its own name as well as Holsum Hearth and Seattle International.